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No Can Do

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It’s no surprise that the trade talks in Cancun bombed. After all, WTO negotiations are notoriously tough going: the current “Doha Round”, launched in 2001, has been hobbled by disagreements, mutual distrust, missed deadlines, and a strong sense on the part of developing countries that their rich counterparts aren’t sincere about free trade. So the 146 trade ministers meeting in Mexico went into the five-day summit with low expectations; especially doubtful was whether rich and poor countries could bridge their differences on agricultural subsidies.

What did surprise a lot of people was the way the talks collapsed. In the event, the ministers didn’t really get around to discussing agricultural subsidies. Rich nations insisted on moving the so-called “Singapore Issues” — new rules on investment, competition, trade facilitation, and transparency in government procurement — to the top of the agenda. The industrialized nations were hoping for a quid pro quo: developing countries would accept the new rules, and rich countries, in return, would take a stab at agricultural reform.

But the talks never got that far. Developing countries weren’t up for discussing the Singapore issues because 1) they wanted to talk about farm subsidies already, and 2) they thought roping themselves into the Singapore rules would be much too costly right now.

For the first time, developing nations banded together, in a loose group called the G-21, and said, essentially: “No dice on Singapore.” The wealthy nations wouldn’t budge; the G-21, led by India, China, and Brazil, had seen enough. Result: end of talks. But the sudden emergence of the G-21 gives a glimpse of what may a shift, however slight, in the balance of power in the world’s rule-setting body.

The Washington Post reports that the WTO talks failed essentially because rich and poor nations don’t see eye-to-eye on trade. While rich nations claim that free trade creates jobs, poor nations contend that the world’s poorest citizens have suffered from rich nation’s restrictions on trade — in essence, free trade isn’t as “free” as it’s billed to be. The United States, Japan, and the E.U. countries subsidize their farmers to the tune of $300 billion a year, allowing rich-country farmers to flood world markets with absurdly cheap produce, driving developing-world farmers out of the market.

According to Alan Kohler of Austalia’s Sydney Morning Herald, rich countries lost at Cancun because they’d benefit from abolishing farm subsidies, which, given their ballooning deficits, they can’t really afford.

“…The three greatest offenders in subsidising their farmers at the expense of food exporters in developing countries – US, Europe and Japan – all have large and widening budget deficits.

…

They can’t forever keep burning billions of dollars subsidising inefficient farmers to grow expensive food but then again, you wouldn’t have known in Cancun over the weekend that those three countries couldn’t actually afford the subsidies they are so vigorously defending.”

Developing countries lost, too. A recent World Bank report found that ditching farm subsidies would lift many millions of people out of poverty. And a multilateral, WTO-stamped agreement might have given poor countries their best chance at a fair deal. Reuters notes that, absent multilateral trade agreements, poor countries will end up saddled with much tougher, bilateral deals.

“In such a world, many countries could find themselves the wallflower at the dance, their economies too small or poor to interest the United States, the European Union and Japan.

…

‘Inevitably, people will put much more effort into bilateral and regional trading agreements, and although there are benefits to be had from those they will emerge much more slowly than if we’d seized the opportunity to reform the world’s trading system as a whole,’ [British Trade and Industry Secretary Patricia Hewitt] told Reuters.”

But, argues the Hindustan Times, there might be bright side to the Cancun flop, at least for the poorer countries:

“The result of the deadlock will be felt in the long term because freer trade could have raised global incomes by $520 billion by 2015, sparking a recovery from the recessionary trends. It means that talks on the Doha Development Round will have to be revived in Geneva soon. A cause for cheer, however, is the emergence of a solid block of developing countries with India, China and Brazil at the helm (G-21, which is now G-23) and the fact that as many as 100 developing countries did not accept the draft declaration.”

In an interview with London’s Independent, Brazilian foreign minister Celso Amorim said that the G-21 had “reshuffled the cards” in terms of World Trade. While the U.S. and E.U. accused poor nations of bonding for convenience, the Independent still asserted that the G-21’s creation was a “powerful counterweight” to rich nations’ power, and was “one of the most significant developments of the World Trade Organisation meeting.”

The BBC’s Alex Kirby agreed, but wondered if developed countries could keep their unified front:

“The poor world has been disunited for too long, and has often had to accept much or even most of the blame for its failure to secure a better deal.

That changed in Cancun. The question now is whether the unity the poor managed to sustain in Mexico will endure into the future.

There will be temptations to bicker, there will be inducements from the north to sidle off and acquiesce in more compromise.

But if the G21 does manage to keep going, the future for farmers in the north could before long be very different.”

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